French v. Foods, Inc.

CourtUnited States State Supreme Court of Iowa
Citation495 N.W.2d 768
Docket NumberNo. 92-27,92-27
Parties124 Lab.Cas. P 57,275, 8 IER Cases 506 David L. FRENCH, Sr., Appellant, v. FOODS, INC.; Dean Van Langen, Individually and d/b/a VL Polygraph Services; VL Polygraph Ltd., A Defunct Corporation of the State of Iowa; and Ronald C. Bartos, Appellees.
Decision Date17 February 1993

Roger J. Kuhle, Des Moines, and John C. Barrett, Des Moines, for appellant.

Russell L. Samson and Gayla R. Harrison of Dickinson, Throckmorton, Parker, Mannheimer & Raife, Des Moines, for appellees.

Considered by McGIVERIN, C.J., and LARSON, LAVORATO, NEUMAN, and ANDREASEN, JJ.

LARSON, Justice.

David French, fired from his job at a Des Moines Dahl's store, sued the store's owner and Ronald Bartos, a vice president, for alleged wrongful discharge. The district court granted summary judgment for the defendants, and French appealed. We affirm.

In September 1990, French was the leader of a crew of overnight grocery stockers at the Dahl's store. Dahl's management had received reports that the night crew was eating food without paying for it, in violation of employment rules. According to one witness, the employees enjoyed a virtual smorgasbord. Dahl's hired a private investigator, Dean Van Langen, to investigate. One at a time, Van Langen took the stocking crew to a room in the basement where he interviewed them.

During the interview, French wrote out a statement, which said, in part:

During my employment at Dahl's for the last two years I have DF knowing not payed for pop from time to time, also a piece or two of chicken, some peanuts. The total of this items would not exceed $20.00. I will be willing to repay Dahl's this amount.

It is undisputed that Van Langen stopped French partway through the written statement, suggesting that French cross out the first "not" and initial it. French complied. Van Langen testified in his deposition that this change was suggested so the statement would make sense. French counters that this "correction" illustrates the coercive nature of the interview and that it erroneously inculpated French in the pilfering.

French was fired immediately, as a result of the Van Langen interview, and this suit followed. Van Langen and his polygraph businesses were initially named as defendants, however, that suit was settled prior to trial. We will refer to the remaining defendants, Foods, Inc. (Dahl's) and Bartos, simply as Dahl's.

French alleged that, by firing him, Dahl's breached an express contract of employment, an implied-in-fact contract, and an implied-at-law covenant of good faith and fair dealing. He also asserted various tort claims. The district court rejected all of these theories and granted summary judgment for the defendants. On appeal, the issue is whether there were disputed issues of material fact and whether Dahl's was entitled to judgment as a matter of law. Iowa R.Civ.P. 237(c).

I. The Unilateral Contract Argument.

Dahl's argues that French was an at-will employee and was subject to discharge at any time, for any reason, or for no reason at all. This is the general rule, firmly ingrained in Iowa law. See Fogel v. Trustees of Iowa College, 446 N.W.2d 451, 455 (Iowa 1989); Wolfe v. Graether, 389 N.W.2d 643, 652 (Iowa 1986).

There are two recognized exceptions to this general rule: (1) when the discharge is in clear violation of a "well-recognized and defined public policy of the State," Fogel, 446 N.W.2d at 455 (quoting Springer v. Weeks & Leo Co., 429 N.W.2d 558, 560 (Iowa 1988)); and (2) when a contract created by an employer's handbook or policy manual guarantees an employee that discharge will occur only for cause or under certain conditions. Fogel, 446 N.W.2d at 455; McBride v. City of Sioux City, 444 N.W.2d 85, 90 (Iowa 1989); Cannon v. National By-Products, Inc., 422 N.W.2d 638, 640 (Iowa 1988).

Under the second exception, the one relied on here,

an employee handbook may create a unilateral contract if (1) the handbook is sufficiently definite in its terms to create an offer; (2) the handbook has been communicated to and accepted by the employee so as to create an acceptance; (3) the employee has continued working, so as to provide consideration.

Fogel, 446 N.W.2d at 456; accord McBride, 444 N.W.2d at 91.

Except when there is ambiguity, the question of whether a written instrument such as an employee handbook binds the parties in contract is a question of law. Fogel, 446 N.W.2d at 456. The threshold legal question in this case is whether the terms of the handbook are sufficiently definite to constitute an offer of continued employment. We believe they are not.

In the preamble, the following provision appears (set out with a solid-line border for emphasis):

This handbook has been prepared to acquaint you with our Company, your responsibilities as an employee, and the many benefits and privileges our employees may enjoy. It is presented as a matter of information only. While the Company believes wholeheartedly in the plans, policies and procedures described, it is committed to reviewing them continually, and reserves the right to change or terminate any or all of them at any time.

Just as you retain the right to terminate your employment at any time, for any reason, Dahl's retains a similar right. No policy or practice of the Company should be construed to change this relationship. Only corporate officers have the right to modify or change this practice, and such action must be in writing.

(Emphasis added.)

Page fifteen of the handbook stated this with respect to termination:

We hope that your association with Dahl's will be a long and happy one. You do have the right, however, to terminate your employment at any time for any or no reason. Dahl's retains a similar right.

....

It is the policy of Dahl's that any conduct which, in its view, interferes with or adversely affects employment or the Company is sufficient grounds for discipline, including dismissal. Examples of conduct for which employment may be terminated include, but are not limited to, unsatisfactory performance, unacceptable tardiness or absenteeism, violation of the "Code of Conduct," dishonesty, insubordination, or any reason not prohibited by law. Dahl's reserves the right to terminate employment immediately, if it believes circumstances warrant.

(Emphasis added.)

In addition, French signed a receipt for a copy of the handbook, which stated:

I certify that I have received a copy of the Dahl's Food Employee Handbook dated July 1990.

I have read it and understand it. I recognize that Dahl's reserves the right to modify or terminate the matters covered in the Handbook at any time. I agree to comply with store policies. I recognize that either Dahl's or I may terminate the employment relationship at any time for any reason.

(Emphasis added.)

The present case must be distinguished from Hunter v. Board of Trustees, 481 N.W.2d 510 (Iowa 1992), in which we upheld a finding of a unilateral contract based on the employee handbook. In Hunter, the handbook was amenable to an interpretation that discharge would be permitted only on one of the seven grounds set out in the handbook (voluntary resignation, voluntary quit, retirement, "three-day quit," expired leave, discharge for cause, and staff reduction).

Unlike Hunter, there is no provision in the handbook in this case that limits the grounds for termination. Nor does the handbook suggest, as in Hunter, that a discharge may only be for cause. We agree with the district court that, as a matter of law, the handbook did not establish a unilateral contract for continued employment.

II. The Implied-In-Fact Argument.

In Cannon, we held that a contractual obligation may be found even if it was not the employer's intention that its handbook confer contractual rights. 422 N.W.2d at 640. French argues that there were disputed fact issues on the "mutual manifestations of assent," Duhme v. Duhme, 260 N.W.2d 415, 419 (Iowa 1977), which underlies this theory, and therefore it was error to grant summary judgment.

French points to a paragraph of the handbook that, he claims, anticipates that the actual practices and customs at the Dahl's store may imply terms supplementing, or even contradicting, those contained in the handbook. The paragraph he relies on stated:

This handbook does not contain all of the information you will need during the course of employment. You may receive additional information through various written notices as well as orally....

We do not agree with French's interpretation of this paragraph, especially in view of the language of the handbook that expressly prohibits modification except under limited circumstances. That provision states:

No policy or practice of the Company should be construed to change this [at-will] relationship. Only corporate officers have the right to modify or change this practice, and such action must be in writing.

The oral statements relied on by French to vary the written provisions of the handbook were not made in writing, nor were they made by officers of the corporation. In fact, they appear to have been merely offhand comments by supervisory personnel with virtually no probative value on the question of Dahl's' right to terminate without cause.

The "mutual manifestation of assent" necessary to establish an implied-in-fact contract, Duhme, 260 N.W.2d at 419, is missing. It is clear that the employer did not "assent" to implied modification of its handbook and in fact strongly...

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